Retail industry watchers have been saying for years that Edward Lampert’s acquisitions of Kmart and Sears were nothing more than real estate plays. After all, there has been very little evidence over the years to suggest he knows what it takes to run a retail empire, particularly one made up of two large and struggling chains. So the recent news that Sears Holdings was selling some of its properties to raise cash provided an opportunity for many to engage in self-congratulation.
Earlier this month, Sears Holdings announced real estate deals including:
- The formation of a real estate investment trust (REIT) with Seritage Growth Properties to acquire 254 of its properties, which will be leased back to Sears Holdings. The company is expected to earn $2.5 billion from the deal.
- The planned creation of a joint real estate venture with General Growth Properties whereby Sears will contribute 12 properties valued at $330 million. General Growth will contribute $165 million to the joint venture.
Yesterday, the retailer announced the creation of another joint venture, this one with Simon Property Group, in which Sears will sell and lease back 10 of its properties valued at $228 million. Simon will contribute $114 million.
“We are pleased to reach this agreement with Simon Property Group, which is an important step in Sears Holdings’ continued transformation to a membership company, without the significant asset intensity of its traditional retail business,” said Mr. Lampert in a statement. “This transaction, taken together with our other initiatives to create shareholder value through our vast real estate portfolio, enhances Sears Holdings’ financial flexibility to invest in longer-term strategies such as our membership and integrated retail platforms.”
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Date: April 14, 2015